Monday, March 2, 2009

Outrage of the Day III

The news concerning General Electric continues to be negative and to grow in intensity. Today, the New York Times reports "Baked-In Losses Weigh on G.E". Fox News repeatedly runs negative commentary, especially Bill O'Reilly. With this avalanche of negative news, I have begun to wonder: Why isn't there a public relations campaign by GE to refute these charges?

Simple logic dictates that you must initiate a public relations campaign to refute these attacks, whether true or not. If you don't refute the attacks they become "truth" in the public eye.So why isn't GE management doing something?

The management of GE is responsible for running the company. To become a manager in a large corporation you must be politically savvy and recognize the need for effective public relations. After all Immelt was able to get himself appointed to Obema's Economic Recovery Advisory Board. From the way GE's stock has decline in value and Immelts absence from the public arena, it would appear that Immelt is more concerned about being on a presidential committee than saving the company he is being paid to manage. (The irony of course is that he is on a committee to provide economic recovery advice to the President and Immelt is failing as the head of a major US corporation.)

This leads me to the issue of leadership. If Immelt were a good leader, he would be leading a public relations charge to refute or explain the negative news. Instead, of being visible and publicly discussing the bad news, Immelt apparently let the news out of the dividend cut at GE in the form of a "leak". As a leader, Immelt should have had had a press conference where he personally discussed the dividend cut and why it was necessary. It is possible, since I don't see all the news, that such a news conference happened, but I have not heard of any. Since, Immelt seems to be "absent" from the public forum, I assume he must be cowering in a bunker somewhere. I wonder if he is busy strapping on his golden parachute?

I have written several emails, over the course of the past several months to GE. None have been answered. Not even the empty automated response of "thank-you" Even though, I have not received a response, maybe a flood of responses, might finally evoke a reaction from GE. If you own stock in GE here is the email address: ir.contacts@corporate.ge.com. I hope that the GE stockholders can get organized to take back control of GE.

Update 3/3/2008: Of course, the next morning I learn that GE has issued its 2008 Annual Report. Here is the link to the Letter to Shareowners. Immelt's Letter to Shareholders contains some suprisngly candid admissions: "In the past, investors asked me what was our target percentage for earnings contribution from financial services and I said below 50%. Going forward we expect 30% of our earnings to come from financial services. I never envisioned getting to our target in this fashion, but nevertheless we now have a more heavily weighted industrial portfolio."

Nevertheless, Immelt, in his letter has not mentioned the dividend cut nor the sweetheart deal given Buffet. Immelt also wrote: "In this very tough environment, GE earned $18 billion, our third highest year in history." If earnings were the third largest in history for GE, there is a credibility concern since the facts don't seem to correlate; the stock has declined from nearly $40 per share to $7 per share and the dividend has been cut. Clearly Immelt has not disclosed all.

Immelt wrote: "Despite our efforts, the GE stock got hammered. Companies with a presence in financial services, like GE, are simply out of favor. I can tell you that no one is more disappointed than I am with the performance of our stock in this tough environment. I assure you that we will work hard to restore your trust, and we will continue to work hard to build GE for the long term." I hope he means what he says and that this is not empty rhetoric.